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Zales Jewelers Makes Dazzling Recovery

In 1992, Irving, Texas-based Zale Corp. filed for protection under Chapter 11 and closed approximately 700 stores among all of its divisions. In 1993, the company emerged from bankruptcy.

Since then, it has been rebuilding and growing stronger, now with approximately 1,100 stores throughout its four divisions: Zales Jewelers, Gordon's Jewelers, Bailey Banks & Biddle Fine Jewelers, and Zales Outlet. Zales Jewelers, also known as Zales, The Diamond Store, plans to have about 1,000 stores in total within the next two years.

The company succumbed to Chapter 11 because it was overextended, as were many other retailers at the time, says Robert J. DiNicola, chairman and CEO of Zale Corp.

To recover from this setback, the company built a new management team and a new direction. Zales Jewelers became the driving force of the company, while Zale Corp. worked on solutions for repositioning itself as a market leader.

"The three main ingredients were merchandising, marketing and store execution," says DiNicola, who joined the company as CEO in 1994. "There were a lot of things broken, but if we didn't fix those three things, it didn't matter about the rest of the business."

Zales Jewelers solved its merchandise problem by expanding its selection and improving the quality of its jewelry. The idea was to know what the customer wanted and be able to provide it.

"In 1993, we might have only had one or two tennis bracelets," DiNicola says. "In 1995, we had a whole case of them with a variety of prices and qualities."

Zales Jewelers has increased sales through marketing and promotions. "Brilliant Buys," which represent 35% of overall business, are key items with value prices promoted through advertisements and signage. On Valentine's Day, Zales offers a box of candy with a heart necklace inside for $99. The retailer sells close to 100,000 every year, DiNicola says.

By promoting Brilliant Buys and improving merchandise presentation, Zales Jewelers repaired its store execution. The retailer also improved customer service, which was enforced when DiNicola started at the company.

"He is the one who really brought the focus to customer service," says Mary Forte, executive vice president and chief administrative officer of Zale Corp.

Although there are stores in traditional regional malls all across the country, Zales Jewelers is still expanding, with the goal of having stores in every appropriate mall location. At around 1,500 to 2,000 sq. ft. each, the stores are all similar in format. DiNicola believes consistency makes the Zale name more recognizable.

"What The Gap is to casual clothing, Zales is to jewelry," he says.

Still, with numerous market competitors, Zales Jewelers must distinguish itself from other jewelers. The retailer does this by concentrating on more than one aspect of its business.

"The bridal and diamond solitaire is historically 40% of the business," DiNicola says. Zales also focuses on two other components: fashion jewelry and watches.

"Those categories have been explosive over the past decade. We have grown both of them quite dramatically. For example, everyone has several watches today," DiNicola says. "Zale uses a multidimensional approach to business instead of a one-dimensional approach."